Carpathian ups resource at Riacho dos Machados

For the last year Carpathian Gold (CPN-T) has focused on converting inferred resources into the measured and indicated category within the open-pit portion of its Riacho dos Machados gold project in southeastern Brazil, about 540 km north of Belo Horizonte in Minas Gerais, one of the country’s oldest and most important mining states.

Now the Toronto-based explorer is weeks away from finishing a feasibility study and released an updated resource estimate on July 26 on the Riacho dos Machados deposit, where Vale (VALE-N) ran an open-pit oxide heap-leach gold operation from 1989-1997.

Updating a resource estimate from May 2009, the new estimate includes results from 55,732 metres of drilling, of which 24,269 metres were holes Vale completed and Carpathian re-sampled. In total, the estimate was based on 362 holes.

The junior wrapped up its Phase II drill program of 20,526 metres earlier this year and the resource estimate for open pit plus underground consists of 812,300 oz. gold in the measured and indicated categories and 692,900 oz. gold in the inferred category.

(The underground resource starts below the open-pit resource, taking into account a 15-metre crown pillar, and extends down 290 metres, and locally about 480 metres below the pit.)

Base-case cutoff grades used were 0.36 gram gold per tonne for the open pit and 1.09 grams gold for the underground component.

(In terms of the open pit alone, measured and indicated oz. grew 200% to 806,200 oz. in 2010, while inferred fell 53% to 355,900.)

The new estimate pegs total open pit and underground measured and indicated resources at 17.25 million tonnes grading 1.46 grams gold for 812,300 oz. gold. (That was a 180% increase from the 290,200 oz. gold in the 2009 resource estimate.) Inferred resources add 11.10 million tonnes of 1.94 grams gold for 692,900 oz. gold.

For the open pit alone, measured and indicated resources reach 17.19 million tonnes grading 1.46 grams gold for 806,200 oz. gold and inferred resources tally 7.17 million tonnes of 1.54 grams gold for 355,900 oz. gold.

For the underground portion alone, measured and indicated resources add up to 53,000 tonnes grading 3.63 grams gold for 6,200 oz. gold and inferred resources add 3.92 million tonnes of 2.67 grams gold for 337,000 oz. gold.

Of the total 2010 resource estimate, 99.2% of the measured and indicated resource and 51.4% of the inferred resource falls within a Whittle pit shell.

Carpathian is now targeting the remaining 355,900 oz. of inferred in-pit resources to convert them into the measured and indicated category, which would significantly extend the mine life, management says.

The latest resource estimate lies within a continuously mineralized gold zone of 2,000 metres in length that dips at 35 to 45 degrees to the southeast. The open-pit portion of the resource extends from surface to a maximum vertical depth of about 300 metres.

The gold-mineralized shear-zone can reach true-thicknesses of up to 35 metres, though a more typical thickness is 5 to 15 metres at open-pit cutoff grades of 0.30 gram gold.

The current resource estimate represents just 2 km of the southern portion of the shear zone. There are also many surface gold targets of similar gold grade that occur along strike within this shear zone. So far, seven exploration targets have been outlined north of the open-pit resource area and one to the south.

Gold mineralization is also open at depth. Once the open-pit is in production, Carpathian says it plans to further evaluate the underground resource, as there is potential to get additional higher grade ounces that could extend the mine life and boost the annual production rate by another 50%, the company says.

Carpathian believes the grade of the mineralization underground is comparable to Yamana Gold’s (YRI-T, AUY-N, YAU-L) underground operating mines in Brazil, the Fazenda Brasileiro and Jacobina mines.

Carpathian hopes to produce more than 100,000 oz. gold a year.

Three rigs are drilling for ore-definition to convert inferred resource “pockets” within the shallow portions of the open-pit as defined in the latest resource to measured and indicated in order to be included in the feasibility study. That program is expected to be finished in the coming weeks.

Carpathian is trading at about 34¢ a share. Over the last year, the junior has traded in a range of 23¢-47.5¢.